(Ecofin Agency) - On Monday, January 20, Chinese artificial intelligence company DeepSeek launched its new AI-powered chatbot, R1. Within days, R1 climbed to the top of the most downloaded free apps on the U.S. App Store, overtaking OpenAI’s ChatGPT. This breakthrough has reignited discussions about the ongoing tech rivalry between the U.S. and China while also raising questions about its impact on Africa, where AI access remains limited due to cost and infrastructure challenges.

Liang Wenfeng (pictured, right) Founder of DeepSeek

A Cheaper, Open-Source Model Raising Concerns in the West

Unlike AI models from Google (Gemini), OpenAI (ChatGPT), or Microsoft (Copilot), which operate under closed licenses and come with high subscription fees, DeepSeek R1 is open-source and significantly more affordable. While ChatGPT Pro subscriptions range from $20 to $200 per month, DeepSeek offers a budget-friendly alternative, with prices between $2 and $5. This could make AI technology more accessible to African startups, small businesses, and public institutions.

According to several tech media outlets, including Numerama, another advantage of DeepSeek R1 is its efficiency. Unlike American AI models that require high-end graphics processors, R1 is designed to consume fewer computing resources. This is particularly concerning for U.S. semiconductor companies that rely on AI-driven demand.

On January 27, Wall Street saw a sharp decline in AI-related tech stocks. AMD, Microsoft, Google, and ARM all recorded major losses, but Nvidia took the hardest hit, losing over $600 billion in market capitalization—the largest single-day drop in U.S. stock market history. This decline is directly tied to the AI industry’s heavy dependence on Nvidia’s graphics processors. The rise of low-power AI models like DeepSeek R1 could reduce demand for these expensive chips, threatening the business model of American tech suppliers.

The situation further escalate the U.S.-China tech rivalry, which has been ongoing since Donald Trump’s first term in 2017. The competition has led to various trade measures, including tariffs, export controls, and market access restrictions.

What It Means for Africa

While this shift in AI competition worries U.S. tech giants, it also raises important questions for Africa, a region where AI has significant potential. According to the Africa Development Insights report published by the United Nations Development Program (UNDP) in June 2024, AI could add $1.2 trillion to Africa’s economy by 2030. Google offers an even higher estimate, predicting a potential boost of $1.5 trillion.

However, despite these promising projections, accessibility remains a challenge. The high cost of Western AI models is a major barrier for many African businesses. DeepSeek’s lower-cost alternative could be a game changer, but it is still too early to determine its real impact. So far, there is no data on its adoption in Africa or how it compares in performance to competing models.

That said, the arrival of a new player from China and the increased competition it brings will be closely watched by African startups, businesses, and institutions. Many will be looking to see whether this competition leads to lower AI costs overall. While DeepSeek presents an exciting opportunity, it also highlights key challenges for Africa, including the need for stronger AI regulations, data protection measures, and improved technical capabilities for regulatory bodies.

The question for Africa is not about choosing between Washington and Beijing—it is about using both options to build an inclusive and sovereign AI ecosystem that serves the continent’s needs.